Correlation Between Steel Dynamics and Brookmount Explorations
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Brookmount Explorations at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Steel Dynamics and Brookmount Explorations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Brookmount Explorations, you can compare the effects of market volatilities on Steel Dynamics and Brookmount Explorations and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Steel Dynamics with a short position of Brookmount Explorations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Brookmount Explorations.
Diversification Opportunities for Steel Dynamics and Brookmount Explorations
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Brookmount is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Brookmount Explorations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookmount Explorations and Steel Dynamics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Steel Dynamics are associated (or correlated) with Brookmount Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookmount Explorations has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Brookmount Explorations go up and down completely randomly.
Pair Corralation between Steel Dynamics and Brookmount Explorations
Given the investment horizon of 90 days Steel Dynamics is expected to generate 13.02 times less return on investment than Brookmount Explorations. But when comparing it to its historical volatility, Steel Dynamics is 9.68 times less risky than Brookmount Explorations. It trades about 0.04 of its potential returns per unit of risk. Brookmount Explorations is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7.10 in Brookmount Explorations on August 30, 2024 and sell it today you would lose (1.80) from holding Brookmount Explorations or give up 25.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Brookmount Explorations
Performance |
| Timeline |
| Steel Dynamics |
| Brookmount Explorations |
Steel Dynamics and Brookmount Explorations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Brookmount Explorations
The main advantage of trading using opposite Steel Dynamics and Brookmount Explorations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Brookmount Explorations can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brookmount Explorations will offset losses from the drop in Brookmount Explorations' long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
| Brookmount Explorations vs. Vertiv Holdings Co | Brookmount Explorations vs. Nasdaq Inc | Brookmount Explorations vs. McDonalds | Brookmount Explorations vs. Walmart |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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